The Truth About Whether Or Not Investment Bankers Add Value

“With investment banking, you make a lot of money, and you get a distorted feeling of how wonderful you are. You’ll be flying around in corporate jets and you’ll be attending board meetings, but you don’t really add value.”

“Jobs for college graduates should make them gain knowledge in at least one of these three areas: how to make something, how to sell something or how to support something.”

While you do learn a lot about markets, transactions, and dealing with massive egos in investment banking, you won’t learn as much about making, selling, or supporting products as someone working at a startup.

The Problem(s)

…but here’s the flaw in Guy’s logic: not everyone wants to start or manage a company.

Some people want other experiences, others want to gain a broader understanding of business, and still others aren’t sure exactly what they want to do.

So if you’re in one of those categories, investment banking is still a good bet.

And no matter what entry-level job you pick, you probably won’t be adding much “value” anywhere.

At first it’s all just learning and moving up the curve, and that’s the same whether you’re an engineer, a marketer, or an investment banking analyst.

Products vs. Services

Finally, you do learn how to make things, sell them, and support them in finance: it’s just that these “things” are financial instruments (if you’re a trader), your own services (bankers), or an investment from your firm (buy-side).

Yes, it’s different from building a new iPhone app that sets the world on fire, but at the very least you learn a lot about selling since you have to do it so much.

They try to make it sound more appealing by creating “leadership” and “rotational” programs but let’s face the facts: are you more likely to get hired somewhere after working at Goldman Sachs or at a random F500 company?

The More Interesting Question

So yes, compared to a startup founder the average junior banker or consultant doesn’t add value.

But you do learn a lot, position yourself for better opportunities, and give yourself flexibility – which is more than 99% of other undergraduate and MBA students can say.

No, these are not quite the same as changing the lives of billions of people, but if banks truly added no value then they wouldn’t exist.

Bankers get accused of “adding no value” because what they bring to the table – relationships, access to the key decision-makers, and specialized skills – is hard to quantify compared to a company making products.

Private Equity, Hedge Funds, and Others

The case for “value add” on the buy-side is more difficult to make because many times, PE firms and hedge funds don’t improve a company’s operations or help the company make more money – it’s just financial engineering.

Instead, they add value by earning a good return on their investments and then distributing the profits to their limited partners. The limited partners themselves are these firms’ “customers.”

But the public at large doesn’t understand how finance works, which is why you see so many attacks against PE firms for “not adding value.”

So What Should You Do?

If you’re interested in investment banking, then go do it.

You may not add value at the junior levels, but that’s true of any job. What you will do is learn a lot and make yourself more valuable in the process.

But if you want to do something less traditional, then you should go do it right away.